US DOJ joins kickbacks lawsuits

Allegations against HP, Sun mount

By Grant Gross, IDG News Service

April 20, 2007

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The US Department of Justice (DOJ) has joined three whistleblower lawsuits alleging that HP, Sun, and Accenture paid and received kickbacks from IT partners in exchange for preferential treatment on government contracts.

The lawsuits, filed in US District Court for the Eastern District of Arkansas, allege that the three companies submitted false claims to the US government on "numerous" government contracts since the late 1990s. The lawsuits, originally filed by Accenture employee Norman Rille and another whistleblower, accuse the companies of creating alliance relationships with dozens of other vendors, giving each other discounts or rebates on products or work for government contracts. The companies did not pass the rebates on to their government clients, according to a DOJ court filing.

"Millions of dollars of kickbacks were sought, received, offered and paid" among the three companies and other technology partners, the DOJ said in a court filing made public Thursday. Any rebates vendors receive as part of a US government contract belong to the government, the DOJ said.

HP issued a statement saying it is confident its business practices are legal. "We plan to vigorously defend this action and look forward to demonstrating that HP has done nothing wrong," the statement said.

An Accenture spokeswoman also said the company is "confident we acted appropriately." Accenture will defend itself against the allegations and is cooperating fully with the government investigation, said Roxanne Taylor, the Accenture spokeswoman.

Sun declined to comment specifically on the lawsuit but said it was cooperating fully with government investigators. The company "takes pride" in its relationship with the federal government, it said in a statement.

Among the more than three dozen IT vendors named as Accenture alliance partners were Cisco, Microsoft, IBM, Dell and Oracle.

For example, Accenture received more than $735,000 (£367,115) in payments from IBM for "favourable treatment and influence" on six government contracts between 2001 and 2006, the DOJ filing alleges.

An IBM spokeswoman didn't immediately have a comment but expressed disbelief about the allegations.

Accenture received more than $20 million in payments from alliance partners between 2000 and 2006, the DOJ alleged. In some cases, the alleged kickbacks came in the form of stock purchase agreements, the DOJ said in its filing.

The DOJ's complaint asserts that these alliance relationships and the resulting alliance benefits amount to kickbacks and undisclosed conflict of interest relationships.

"The Department of Justice is acting in this case to protect the integrity of the procurement process," Peter Keisler, assistant attorney General for the DOJ's civil division said.

The suits were originally filed under the whistleblower provisions of the US False Claims Act. Under that statute, a private party can file an action on behalf of the US and receive a portion of the recovery.

Under the False Claims Act, the US government may recover three times the amount of its losses plus civil penalties.